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MILAN – Starbucks posted lower-than-expected quarterly results: the world’s largest coffee house chain released yesterday, Tuesday 29 April, figures for the second quarter ended 30 March. Consolidated net revenues were $8.76 billion, up 2% on the same quarter last year, but slightly below analysts’ expectations. EPS fell to 41 cents, down from 68 cents a year ago and well below a consensus of 49 cents. Global same-store sales declined 1% (versus analyst expectations of -0.5%), driven by a 2% decline in comparable transactions, partially offset by a 1% increase in average ticket.
International comparable sales rose 2%, compared with estimates of a 1.13% drop.
North American same-store sales fell 1% for the fiscal second quarter ended March 30, worse than the 0.24% drop estimated by analysts. The company said sales in Canada returned to growth in the quarter
Gross margin fell 590 basis points in the quarter and the company reported adjusted earnings per share of 41 cents, missing estimates of 49 cents.
“Our financial results don’t yet reflect our progress, but we have real momentum with our ‘Back to Starbucks’ plan,” chairman and chief executive officer Brian Niccol said in a statement.
The company will invest more in staffing and less on equipment, including an automation system that it previously touted, Niccol said on Tuesday, breaking with a wider industry trend to rely more on technology for store operations.
Niccol said additional staffing was critical to improving the customer experience — his main objective since assuming leadership in September.
“Over the last couple of years, we’ve been removing labor from the stores, I think with the hope that equipment could offset the removal of the labour,” Niccol said in an investor call. “What we’re finding is that wasn’t an accurate assumption with what played out.”
Starbucks: Q2 Fiscal Year 2025 Highlights
- Global comparable store sales declined 1%, driven by a 2% decline in comparable transactions, partially offset by a 1% increase in average ticket
- North America comparable store sales declined 1%, driven by a 4% decline in comparable transactions, partially offset by a 3% increase in average ticket; U.S. comparable store sales declined 2%, driven by a 4% decline in comparable transactions, partially offset by a 3% increase in average ticket
- International comparable store sales increased 2%, driven by a 3% increase in comparable transactions, partially offset by a 1% decline in average ticket; China comparable store sales were flat, driven by a 4% increase in comparable transactions, offset by a 4% decline in average ticket
- The company opened 213 net new stores in Q2, ending the period with 40,789 stores: 53% company-operated and 47% licensed
- At the end of Q2, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 17,122 and 7,758 stores in the U.S. and China, respectively
- Consolidated net revenues increased 2% to $8.8 billion, or a 3% increase on a constant currency basis
- GAAP operating margin contracted 590 basis points year-over-year to 6.9%, primarily driven by deleverage and additional labor primarily in support of “Back to Starbucks.” Also contributing were restructuring costs related to simplifying our global support organization.
- Non-GAAP operating margin contracted 460 basis points year-over-year to 8.2%, or contracted 450 basis points year-over-year on a constant currency basis
- GAAP earnings per share of $0.34 declined 50% over prior year
- Non-GAAP earnings per share of $0.41 declined 40% over prior year, or declined 38% on a constant currency basis
“My optimism has turned into confidence that our ‘Back to Starbucks’ plan is the right strategy to turn the business around and to unlock opportunities ahead,” commented Brian Niccol.
“Improving transaction comp in a tough consumer environment at our scale is a testament to the power of our brand and partners getting ‘Back to Starbucks.’ We are on track and if anything, I see more opportunity than I imagined,” Niccol added.
“While our financial results are far from Starbucks potential, we are working to build back a better business,” commented Cathy Smith, chief financial officer. “We are developing new muscles to test, iterate and scale quickly, in service of long-term, durable growth and strong returns on invested capital,” Smith added.
Net revenues for the North America segment increased 1% over Q2 FY24 to $6.5 billion in Q2 FY25, primarily due to net new company-operated store growth of 5% over the past 12 months. This increase was partially offset by a 1% decline in comparable store sales, driven by a 4% decline in comparable transactions, partially offset by a 3% increase in average ticket. Also contributing was a decline in our licensed store business.
Operating income decreased to $748.3 million in Q2 FY25 compared to $1.1 billion in Q2 FY24. Operating margin of 11.6% contracted from 18.0% in the prior year, primarily driven by deleverage and additional labor primarily in support of “Back to Starbucks.”
Net revenues for the International segment increased 6% over Q2 FY24 to $1.9 billion in Q2 FY25, primarily due to net new company-operated store growth of 8% over the past 12 months, an increase in our licensed store business, as well as incremental net revenue from the acquisition of a U.K. licensed business partner. Also contributing was a 2% increase in comparable store sales, driven by a 3% increase in comparable transactions, partially offset by a 1% decline in average ticket. These increases were partially offset by an approximate 2% unfavorable impact from foreign currency translation.
Operating income decreased to $217.0 million in Q2 FY25 compared to $233.8 million in Q2 FY24. Operating margin of 11.6% contracted from 13.3% in the prior year, primarily driven by increased promotional activity and restructuring costs related to simplifying our global support organization, partially offset by leverage.
Net revenues for the Channel Development segment declined 2% over Q2 FY24 to $409.0 million in Q2 FY25, primarily due to a decline in revenue in the Global Coffee Alliance, partially offset by an increase in global ready-to-drink revenue.
Operating income decreased to $193.5 million in Q2 FY25 compared to $216.3 million in Q2 FY24. Operating margin of 47.3% contracted from 51.7% in the prior year, primarily driven by higher product costs related to the Global Coffee Alliance, as well as a decline in our North American Coffee Partnership joint venture income. This contraction was partially offset by mix shift.
Company Update
In February, the company announced the reduction of 1,100 support partner roles and several hundred additional open and unfilled positions within its global support organization to help deliver on our “Back to Starbucks” plan and position the company for future success.
In March, the company announced that Cathy Smith had been appointed chief financial officer, effective March 24, 2025, and that Rachel Ruggeri would no longer serve in that role.
In March, the company virtually hosted its 33rdAnnual Meeting of Shareholders. Brian Niccol delivered opening remarks, sharing early progress in our “Back to Starbucks” plan and optimism for the future. Mellody Hobson, former lead independent director, retired from the Starbucks Board of Directors (the “Board”) after 20 years of dedicated service and Jørgen Vig Knudstorp was appointed the lead independent director of the Board.
The Board declared a cash dividend of $0.61 per share, payable on May 30, 2025, to shareholders of record on May 16, 2025. The company had 60 consecutive quarters of dividend payouts with CAGR of nearly 19% over that time period, demonstrating the company’s commitment to consistent value creation for shareholders.
